Nissan Faces Major Cuts with Shares Falling by 10%

Nissan Motor Co., grappling with intensifying industry challenges and internal issues, announced deep cuts to its workforce, production, and financial forecasts for the fiscal year. The automaker’s shares fell sharply in Tokyo on Friday, declining as much as 10% to their lowest level since October 2020, after the company revealed it would lay off 9,000 employees and reduce its manufacturing capacity by 20% following a 94% drop in net income for the first half of the fiscal year. Nissan also plans to reduce its stake in Mitsubishi Motors Corp. after depleting $2.9 billion in cash over the past six months.

Chief Executive Officer Makoto Uchida acknowledged that Nissan’s struggles stem not only from industry-wide pressures but also from internal missteps, including overly ambitious sales targets and the rapid rise of Chinese competitors. Uchida warned investors that meeting sales targets would be challenging and emphasized the need for Nissan to rebuild its resilience and steer toward recovery.

Nissan now projects its operating income to drop 70% from earlier expectations, reaching only $980 million by the end of the fiscal year in March. Additionally, revenue estimates have been cut by over 9%, reflecting an outlook of stagnant growth.

At the helm since 2019, Uchida has faced difficulty revitalizing Nissan amid stiff competition from Tesla Inc. and China’s BYD Co., leaving the automaker trailing its Japanese peers. Analyst James Hong of Macquarie Securities Korea described Nissan as “the weakest” among major Japanese carmakers, suggesting that price cuts might be the company’s only option for boosting sales.

To raise funds, Nissan will sell approximately a third of its stake in Mitsubishi Motors through the Tokyo Stock Exchange, a 10% holding valued at around $450 million at Thursday’s close. This move comes just eight months into Uchida’s three-year turnaround plan, during which Nissan had already downgraded its profit forecast to $3.3 billion in July, following disappointing sales in China, Japan, and North America.

The company reported a quarterly profit of $200 million for the period ending in September, missing consensus estimates of $430 million and well below last year’s $1.36 billion earnings.

Uchida’s roadmap for Nissan includes expanding its electric vehicle lineup, securing new partnerships, and increasing annual sales by 1 million units by 2027. However, analysts have expressed concerns that Nissan’s lineup lacks sufficient hybrid models at a time when EV demand is faltering. According to Macquarie’s Hong, hybrids are bolstering profitability for Toyota and Honda, indicating a need for Nissan to reconsider its strategy.

Like many legacy carmakers, Nissan has struggled to maintain its foothold in China, the world’s largest automotive market. In June, Nissan announced it would cease operations at its Changzhou plant due to declining sales.

The company has adjusted its production target to around 3.2 million vehicles for the fiscal year, representing a 7% decrease from the previous year. Retail sales projections have also been trimmed to 3.4 million units across key markets, including North America, China, Japan, and Europe.

In an attempt to improve efficiency, Nissan entered a collaborative agreement in March with Honda Motor Co. and Mitsubishi Motors for joint software development, batteries, and other EV components. This alliance places Nissan in direct competition with Toyota and its partnerships with Subaru Corp., Suzuki Motor Corp., and Mazda Motor Corp.

On Thursday, Uchida emphasized that Nissan’s strategic partnerships with Renault SA, Mitsubishi Motors, and Honda would enhance its investment efficiency and strengthen its product portfolio. The announced job cuts represent about 7% of Nissan’s workforce.

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